Greyson and Secretary, Department of Social Services (Social services second review)
[2019] AATA 82
•4 February 2019
Greyson and Secretary, Department of Social Services (Social services second review) [2019] AATA 82 (4 February 2019)
Division:GENERAL DIVISION
File Numbers: 2018/2924
2018/2932
Re:Donald and Yvonne Greyson
APPLICANT
AndSecretary, Department of Social Services
RESPONDENT
DECISION
Tribunal:Member C Edwardes
Date:4 February 2019
Place:Perth
The decision under review is affirmed.
........................[Sgd]...........................................
Member C Edwardes
CATCHWORDS
SOCIAL SECURITY – age pension asset test – value of applicants’ assets – whether applicant to be attributed with assets of private companies and trusts – role of applicants in running of companies – attribution percentage – control test – decision affirmed.
LEGISLATION
Social Security Act 1991 (Cth) – ss 55, 1064, 1118, 1129, 1207
Social Security (Administration) Act 1999 (Cth) – s 179
CASES
Dubois and Secretary, Department of Social Services [2017] AATA 2164
Geidans and Secretary, Department of Family and Community Services [2003] AATA 773
McDonald v Director-General of Social Security (1984) 1 FCR 354SECONDARY MATERIALS
Social Security (Attributable Stakeholders and Attribution Percentages) Principles 2017 (Cth)
REASONS FOR DECISION
Member C Edwardes
4 February 2019
THE APPLICATION
This is an application for review of a decision of the Social Services and Child Support Division of the Administrative Appeals Tribunal (AAT1) dated 19 April 2018 (T3, 10-20). The AAT1 affirmed a decision of the Authorised Review Officer (ARO) that the Applicants had an asset attribution of 100% of the assets of L&M Dunstan Nominees Pty Ltd (Dunstan Nominees) and therefore at the time of their claim for an age pension their aggregated assets were above the determined asset threshold.
The General Division of the Administrative Appeals Tribunal (the Tribunal) has jurisdiction to hear this application pursuant to s 179 of the Social Security (Administration) Act 1999 (Cth).
BACKGROUND
The Applicants applied for age pension on 17 February 2017 (T13, 171-194).
The Department refused to grant the Applicants the pension on the basis that a complex assessment officer (CAO) had determined that Donald Greyson fulfilled a major role in the operations of Dunstan Nominees and concluded it was 100% attributable to the Applicants (T69, 935).
On 22 January 2018 the Applicants requested a review of the decision (T50, 488).
The ARO affirmed the decision of the CAO on 2 February 2018 (T54, 492-506).
The ARO found:
·You lodged a claim for Aged Pension on 17 February 2017.
·On 11 December 2017 a CAO assessed your involvement in L&M Dunstan Nominees Pty Ltd and determined that you and your partner are the sole controllers of L&M Dunstan Nominees Pty Ltd.
·The CAO also found that the company was a designated private company because it had consolidated revenue of less than $25 million and its gross assets are less than $12.5 million.
·The primary assets of the company are real estate including property held in Australia and Christmas Island (CI).
·The 2017 company financials list the purchase date and price of the real estate as follows;
·[xx xx] Avenue, Woodlands purchased on 21 May 2003 for $155,097
·Lot [xx xx] Road, CI purchased on 15 February 2005 for $240,265
·Unit [xx xx], CI purchased on 17 October 2017 for $263,450
·[xx xx] Rd, CI purchased on 2 January 2010 for $299,690
·[xx xx], CI purchased on 2 January 2010 for $478,653
·[xx xx] Rd, Spearwood purchased on 15 July 2010 for $201,743
·The balance of the secured bank loan was recorded as $164,000 with the current estimated market value of the real estate being $2,293,450.
·The claim for Age Pension was rejected on the basis that the Age pension assets test limit of $816,000 had been exceeded.
The Applicants filed an application for review of the ARO’s decision on 13 February 2018 (T56/57, 522-526).
The AAT1 affirmed the decision of the department and the ARO on 19 April 2018 and concluded accordingly (T3, 16-20):
23.Whilst it is the case that neither Mr nor Mrs Greyson now hold any shares in Dunstan Nominees, in the tribunal’s view the evidence demonstrates that the company continues to be sufficiently influenced by Mr Greyson who continues to exercise control over the company though [sic] his children. In reaching this view the tribunal determined that the evidence supports the following conclusions:
a)The establishment of Dunstan Nominees as the main asset holding entity was the result of a decision made by Mr and Mrs Greyson to secure the financial future of themselves and their family when the assets of Greyson Nominees were under threat.
b)Mr Greyson was the face and representative of Dunstan Nominees and he secured the finance which enabled it to purchase the property previously owned by Greyson Nominees and likewise he was the person who in effect negotiated the subsequent sale of that property to third parties which provided the significant equity which allowed Dunstan Nominees to make other significant property acquisitions.
c)Mr Greyson stated in evidence that whilst decisions are made as a family they are ‘guided by his expertise and experience’. It is that guidance, expertise and contacts which has facilitated the acquisition of assets by Dunstan Nominees.
d)The evidence demonstrates that Mr Greyson is the person who is intimately aware of the operation and dealings of the company; he has been involved in the decision making concerning the acquisition of properties. Mr Greyson manages the day to day decisions and business of Dunstan Nominees and is the signatory to its bank account. In effect once the limitations imposed upon him holding a directorship were lifted he resumed that role in the company.
e)Mr and Mrs Greyson have personally benefitted from asset acquisitions made by Dunstan Nominees either in their own right or through the auspices of related family trusts and other private companies (such as the transfer of the Banjup property from Dunstan Nominees to Mr and Mrs Greyson, or utilisation of property such as the Spearwood shed).
f)Apart from their son (who now owns and operates the hardware store) none of the other children apart from their shareholding have any direct involvement or interest in the affairs of the company. One daughter has her own business as a beautician and the other is a hairdresser.
24.The tribunal is for these reasons satisfied that Dunstan Nominees is a controlled private company (in relation to Mr Greyson). As such Mr Greyson will be an attributable stakeholder with an asset attribution of 100% of the assets or income of the company – unless the tribunal determines a lower percentage. Section 1207X of the Act allows the Secretary to determine that an individual is an attributable stakeholder with an asset attribution of 100% or less. The Social Security (Attributable Stakeholders and Attribution Percentages) Principles 2017 require the Secretary to consider the following:
6Application
(1) This Part applies if, but for a determination by the Secretary, the individual would be an attributable stakeholder of the company or trust.
(2) The Secretary must consider the relationship between the individual and the company or trust having regard to:
(a)the reason why, but for a determination, the individual would be an attributable stakeholder; and
(b) the circumstances mentioned in this Part.
(3) In particular, the Secretary must consider whether the effect of one or more of the circumstances mentioned in this Part, in relation to the individual and the company or trust, provides a sufficient basis on which to determine that the individual is not an attributable stakeholder of the company or trust.
…
15Application
(1) This Part applies if, but for a determination by the Secretary, the asset attribution percentage of the attributable stakeholder, in relation to the company or trust, would be 100%.
(2) The Secretary must consider the relationship between the individual and the company or trust, having regard to the circumstances mentioned in this Part.
(3) In particular, the Secretary must consider whether the effect of one or more of the circumstances mentioned in this Part, in relation to the individual and the company or trust, provides a sufficient basis on which to determine a percentage lower than 100% as the asset attribution percentage.
25.Principles 7 to 13 are relevant when considering circumstances that make it inappropriate for a person to be an attributable stakeholder of a company and Principles 15 to 22 contain the decision making principles if a determination is to be made that the asset attribution percentage is to be less than 100%. These considerations are as follows:
•Circumstances affecting relationship with company or trust
•Contribution to company or trust
•Past benefit from distributions by company or trust
•Future benefit from distributions by company or trust
•Benefit from assets and income of company or trust
•Existing attribution to individual
•Other circumstances
26.The background to the relevant attribution provisions has been considered in previous Administrative Appeal Tribunal decisions, including Geidans and SDFC [2003] AATA 773 (Geidans) at [29]-[31]:
The amendments to the Social Security Act 1991 … marked a significant change in the treatment of an individual’s relationships to private companies and trusts for the purpose of calculating entitlement under the social security law. The government’s stated purpose was to base income support entitlements “…upon a person’s level of resources, not on the way he or she holds those resources.” This happens “…when a private trust or company is recognised as a designated private trust or company, the assets and income of these private trusts and companies may be attributed to a person who controls or who has contributed to these structures.” (Second Reading Speech Hansard/Senate 3 October 2000, page 17711).
The first requirement is that the company is a ‘designated private company’ as defined under section 1207N of the Act … The income and assets from a ‘designated private company’ may be attributed to an individual, as an attributable stakeholder, if either the control or source tests set out in sections 1207Q(2) and (3) respectively of the Act are satisfied. If either or both of these tests are satisfied the company would be a controlled private company in relation to an individual, in this case the applicant.
27.Principle 16 requires consideration of relevant circumstances that make it inappropriate for Mr and Mrs Greyson to have asset attribution of 100%. It also requires consideration of whether having regard to the relationship between the company and Mr and Mrs Greyson, whether Mr and Mrs Greyson can ‘reasonably be expected to exercise effective control in relation to the company or trust’. As noted in Geidans at [34]-[35]:
“Control includes control as a result of, or by any means of, trusts, agreements, arrangements, understandings and practice, whether or not having legal or equitable force and whether or not based on legal or equitable rights”. (Original italics.)
The word ‘effective’ is not defined in the Act. The Macquarie Dictionary defines it as, “serving to effect the purpose; producing the intended or expected result”.
28.In this matter whilst Mr and Mrs Greyson no longer hold shares in Dunstan Nominees, the evidence demonstrates and the tribunal has found that Mr Greyson continues to exercise significant control. There continues to be a strong and close relationship between the company and Mr Greyson who acts as a director, secretary and day-to-day manager of its affairs. The substantial assets acquired by the company have their origins in property held by Mr and Mrs Greyson’s company, Greyson’s Nominees, and as noted it was through Mr Greyson that Dunstan Nominees acquired that property and subsequently sold it at a significant profit. It was this money which in turn funded the acquisition of other properties by the company. Mr and Mrs Greyson were also intimately involved in the acquisition of the Woodlands property and have themselves directly benefited (through their interest in the CI Hardware Trust which is controlled by Dunstan Nominees) from the transfer of the property in which they now reside.
29.Taking into account the available evidence and applying the relevant decision-making principles the tribunal was satisfied that in this matter it is appropriate to determine an asset attribution of 100% to Mr and Mrs Greyson. As noted, on this basis their combined assets as of the date of claim exceeded the relevant asset threshold.
RELEVANT LEGISLATION
The legislative framework is governed through:
·Social Security Act 1991 (Cth) (the Act);
·Social Security (Administration Act) 1999 (Cth) (the Administration Act); and
·Social Security (Attributable Stakeholders and Attribution Percentages) Principles 2017 (Cth) (the Principles)
Section 55 of the Act provides that:
A person’s age pension rate is worked out:
(a)if the person is not permanently blind—using Pension Rate Calculator A at the end of section 1064 (see Part 3.2);…
Module A of s 1064 of the Act provides that the rate of age pension is subject to an income test (Module E of s 1064) and an asset test (module G of s 1064). The age pension rate is to be calculated under whichever test results in the lower rate of pension.
Step 1 in Module G requires a calculation of the value of the person’s assets. Note 2 of that step refers to assets that are to be disregarded in accordance with s 1118 of the Act, and Note 3 refers to the valuation of an asset that is subject to a charge or encumbrance in line with s 1121 of the Act.
Part 3.18 of the Act provides for a person to be attributed with the value of the assets from private companies and private trusts where that person holds and controls, or is the source of, the assets of the company and/or trust.
Section 1207A of the Act defines control:
control includes control as a result of, or by means of, trusts, agreements, arrangements, understandings and practices, whether or not having legal or equitable force and whether or not based on legal or equitable rights.
Section 1207C of the Act defines Associates which includes relatives at s 1207C(1)(e).
ISSUES
The issue for determination is whether the Applicants passed the asset test for age pension.
EVIDENCE
The Tribunal received the following evidence:
·Applicant’s submission dated 11 September 2018 (Exhibit A1);
·T documents (T1-70, 1-992) (Exhibit R1); and
·Statement of Facts Issues and Contentions (SOFIC) dated 31 October 2018 (Exhibit R2).
The Tribunal has reviewed all of the material before it. The Tribunal is satisfied that all relevant evidence was before it, and that both parties were provided an opportunity to address the evidence and the matters in issue, either orally or in writing. Relevant aspects of the evidence and material before the Tribunal will be analysed and referred to below.
The Respondent makes the following contentions (R2):
Attribution of Dunstan Nominees to the Applicants
33.As at February 2017 the Department assessed the combined assets of the Applicants as totalling $3,078,944. Most of that amount is made up of the assets of Dunstan Nominees, which were assessed by the Department as at 17 February 2017 as being $2,802,267 (T67, 705).
Designated private company
34.Section 1207N of the Act, which relates to determining whether a company is a 'designated private company', states:
(1)For the purposes of this Part, a company is a designated private company at a particular time if:
(a) the company satisfies at least 2 of the following conditions in relation to the last financial year that ended before that time:
(i)the consolidated revenue for the financial year of the company and its subsidiaries is less than $25 million, or any other amount prescribed by regulations made for the purposes of paragraph 45A(2)(a) of the Corporations Act 2001;
(ii) the value of the consolidated gross assets at the end of the financial year of the company and its subsidiaries is less than $12.5 million, or any other amount prescribed by regulations made for the purposes of paragraph 45A(2)(b) of the Corporations Act 2001;
(iii) the company and its subsidiaries have fewer than 50, or any other number prescribed by regulations made for the purposes of paragraph 45A(2)(c) of the Corporations Act 2001, employees at the end of the financial year; or
(b) the company came into existence after the end of the last financial year that ended before that time; or
(c) the company is a declared private company (see subsection (2)); and the company is not an excluded company (see subsection (5)).
35. The Secretary contends that Dunstan Nominees was a designated private company from 17 February 2017, as it meets the criteria set out at 1207N(1)(a) of the Act - and is not excluded pursuant to subsection 1207N(5) of the Act.
Controlled private company
36. Pursuant to section 1207Q of the Act, a company is a controlled trust or company in relation to an individual if the company is a designated private company; and the individual passes the control test; or the individual passes the source test.
37.The control test is set out in section 1207Q(2) of the Act:
(2)For the purposes of this section, an individual passes the control test in relation to a company if:
(a) the aggregate of:
(i)the direct voting interests in the company that the individual holds, and
(ii)the direct voting interests in the company held by associates of the individual;
is 50% or more; or
(b) the aggregate of:
(i)the direct control interests in the company that the individual holds; and
(ii)the direct control interests in the company held by associates of the individual; is 15% or more; or
(c) the company is sufficiently influenced by:
(i) the individual; or
(ii) an associate of the individual; or
(iii) 2 or more entities covered by the preceding subparagraphs; or
(d) the individual (either alone or together with associates) is in a position to exercise control over the company.
38.All the direct voting interest in the company are held by associates of the Applicant, that is his children Donna Greyson and Michael Greyson satisfying s 1207Q(2)(a) of the Act.
39.Associates of the Applicant, that is his children Donna Greyson and Michael Greyson are entitled to 100% of the capital and dividends of the company satisfying s 1207Q(2)(b) of the Act.
40.The Secretary also contends that Mr Greyson satisfied section 1207Q(2)(c) and/or (d) of the Act. Mr Greyson, while not being a shareholder of Dunstan Nominees, has continued to hold formal roles as the director and secretary of the company. He stated that he is intimately involved in the day to day running of the business and in decision making:
a. In a phone call with an employee of the Department on 11 December 2017 (T69, p935), it is noted on Mr Greyson's record that Mr Greyson:
...continued to be the secretary and director of the L&M Dunstan nominees because he enjoys doing it and that his children [are] too busy to manage the companies and trust. He consults with his children when he makes a decision but he advised that he is only managing the business and investments for them …
b. On 22 January 2018, Mr Greyson wrote to the Department and stated that his "task is to manage the company's day to day functions under the direction of the shareholders." Mr Greyson states that he does this as a service to his children (T53, 491).
c.In a phone call with the ARO on 31 January 2016 (T55, p512), Mr Greyson told the authorised review officer of the Department that he was “running the business on behalf of his children who were too busy to do it.”
d.Mr Greyson told the AAT1 that his children are "guided by his experience and expertise".
e. The ASIC extract lists the registered business address of Dunstan Nominees as the Banjup Property, the Applicant’s home address (T55, p 519).
f. The Applicant's individual tax return for 2015/2016 lists the Dunstan Nominees bank account as his preferred payment destination (T62, p 570). The AAT1 noted Mr Greyson accepted he is the sole signatory and has full authority to utilise Dunstan Nominee's accounts (T3, [18(n)], p 15).
41.The Secretary therefore contends that Mr Greyson satisfies the control test in s 1207Q (2) of the Act.
Attributable stakeholder
42. Section 1207X of the Act sets out how to determine whether a person is an attributable stakeholder and if so, how much that attribution should be and states:
(1) For the purposes of this Part, if a company is a controlled private company in relation to an individual:
(a) The individual is an attributable stakeholder of the company unless the Secretary otherwise determines; and
(b) if the individual is an attributable stakeholder of the company - the individual’s asset attribution percentage in relation to the company is:
(i) 100%; or
(ii)if the secretary determines a lower percentage in relation to the individual and the company — that lower percentage; and
(c) if the individual is an attributable stakeholder of the company — the individual’s income attribution percentage in relation to the company is:
(i)100%; or
(ii)If the Secretary determines a lower percentage in relation to the individual and the company—that lower percentage.
…
(5) In making a determination under this section, the secretary must comply with any relevant decision making principles.
Should a determination be made that Mr Greyson is not an attributable stakeholder?
43. Pursuant to section 1207X(1) the Secretary contends that, prima facie, Mr Greyson is an attributable stakeholder of Dunstan Nominees, as it is a controlled private company in relation to him. Therefore, Mr Greyson should be deemed with a 100% attribution percentage unless the Secretary determines otherwise.
44. Whilst paragraph 1207X(2)(c) does not create an onus of proof, the practical operation of the provision is that the Tribunal must consider whether it should determine that the Applicant should not be an "attributable stakeholder''. If the Tribunal is left is a state of doubt, then the Applicant remains an "attributable stakeholder": McDonald v Director General of Social Security (1984) 1 FCR 354.
45. Section 1207X(5) states that in determining the attribution percentage the Secretary must comply with the relevant decision-making principles. These decision-making principles are contained in Part 2 of the Principles.
46. Clause 6 of the Principles states that in making its determination the Secretary must consider why, without a determination, the Applicant would be considered an attributable stakeholder and the various circumstances set out in the Principles. In particular the Secretary must consider whether one or more of the circumstances mentioned would provide a sufficient basis to determine the Applicant is not an attributable stakeholder.
47. In Dubois and Secretary, Department of Social Services [2017] AATA 2164 Deputy President Rayment explained, at [16]:
The Principles are such as to enable the Secretary to ensure that the Act does not operate unfairly in a particular case, consistently with the beneficial purpose of the legislation as a whole in providing pensions for those in need relative to their needs but not otherwise. The division is cast in broad terms because individuals might use private trusts or private companies to avoid the means test, and the discretion exercisable under the Principles will enable a decision-maker to take account of all the circumstances of the particular case ...
48. In Re Geidans and Secretary, Department of Family and Community Services [2003] AATA 773 Member L Savage Davis said at [33]:
Principle 6 provides in particular that it must be considered whether the effect of one or more of the circumstances mentioned in relation to the individual and the company provides a sufficient basis on which to determine that the individual is not an attributable stakeholder of the company. It is not necessary for all the principles to be satisfied.
49. The Secretary contends that the relevant circumstances do not provide a sufficient basis for a determination that Mr Greyson is not an attributable stakeholder. The Secretary contends the relevant circumstances are as follows:
a. The circumstances affecting the relationship with the company (Principles, cl 6(2) and 7): Mr Greyson continues to be a joint director and the secretary of Dunstan Nominees; Mr Greyson meets the control test in section 1207(2)(a) and (b) as his associates hold 100% of the direct voting interests and shareholdings; Mr Greyson meets the control test in paragraph 1207(Q)(2)(c) and/or (d) due to his continued influence and control over the decision making and operation of Dunstan Nominees.
The Tribunal in Re Geidans concluded that the applicant maintained effective control of the company in that case despite having transferred his legal interests to his children. The Tribunal relied in part on the continued involvement of the applicant in the decision making of the company to support their conclusion (see ([34]-[36]).
b. Contribution by the Applicant to the company (Principles, cl 8): Information about the acquisition of various assets by Dunstan Nominees, Greyson Nominees and Cebay Holdings is set out at paragraphs [11]-[23] above. The Secretary acknowledges that it is difficult, on the currently available evidence, to ascertain the exact timeline of events or sources of funds that lead to the acquisition of the various assets in Dunstan Nominees, but contends that on the preponderance of evidence the Applicants have certainly made contributions to those acquisitions. In particular:
• The Applicants established Dunstan Nominees and acquired its first asset a caravan park in Geraldton.
• The Highway Property was purchased by Dunstan Nominees from Greyson Nominees at a time when the Applicants were directors of both companies. Mr Greyson arranged the finance for the purchase.
• The Woodlands Property was purchased by Dunstan Nominees from Tonya Greyson who had purchased it from Cebay Holdings. Finance for the acquisition of the Woodlands property was provided by Cebay Holdings, the Applicants were directors and shareholders of Cebay Holdings at all relevant times.
• The proceeds of the sale of the Roadhouse in Beaufort River were used by the Applicants to purchase a hardware store on Christmas Island, which was later acquired by Dunstan Nominees in about 2008.
• The Applicant’s [sic] purchased their current home In Banjup from Cl Hardware Trust (as controlled by Dunstan Nominees) for $1,198,111.94 in October 2016. Mr Greyson is a beneficiary of the Cl Hardware Trust. Mr Greyson signed as transferor on behalf of Dunstan Nominees and signed as transferee, along with Mrs Greyson, personally.
• The Applicant advised the AAT1 that the decision to establish Dunstan Nominees as the main asset holding entity was the result of a decision made by the Applicants to secure the financial future of themselves and their children (T3, [23(a)], p 17).
c. Past and future benefit from distributions by the company (Principles, cl 9 and 10): The Applicants have not been shareholders in the company since August 2001. They are not, on the face of the constituent documents of the company, legally entitled to any distributions of income or capital of the company.
d. Clause 10 also requires consideration of whether it is 'reasonably foreseeable' that the Applicants may receive a benefit from a future distribution by the company. In addition clause 11 requires consideration of whether the Applicant receives any other benefit from the company. The Secretary contends it is reasonably foreseeable that the Applicants would receive a benefit from a future distribution of the company and that they receive other benefits from the assets or income of the company because:
• As contended earlier, the Applicants have made considerable contributions to the acquisitions of assets in Dunstan Nominees.
• The Applicants transferred their single ordinary share for the company in 2001 for $1 each to their children.
• Mr Greyson subsequently assisted his children to acquire the current assets of Dunstan Nominees. Including through the negotiation of finance from banking institutions and from companies in which he was a director and shareholder.
• Mr Greyson continues to assist his children in the day to day running of the company and stated to the AAT1 that the company was established to secure the financial future of the Applicants and their children.
• As noted by the AAT1, the Applicants have benefited both directly and indirectly from the asset acquisitions of Dunstan Nominees including through the receipt of the Banjup property and utilisation of the Spearwood storage facility.
e. The Applicants are not attributable stakeholders of any other company or trust (Principles, cl 12).
Should the Applicants’ "asset attribution percentage” be less than 100%?
50.Paragraph 1207X(2)(d) has the effect that the Applicants' "asset attribution percentage" is 100% unless the Tribunal otherwise determines. Whilst the provision does not create an onus of proof, the practical operation of the provision is that the Tribunal must consider whether it should determine that the Applicant's "asset attribution percentage" should be lower than 100%. If the Tribunal is left in a state of doubt, then the Applicant's attribution percentage" remains 100%: McDonald v Director-General of Social Security (1984) 1 FCR 354.
51.In that event, the Applicants' asset attribution percentage is 100% unless the Tribunal determines a lower percentage in accordance with the decision-making principles in Part 3 of the Principles.
52. Part 3 of the Principles mirrors Part 2. The Secretary repeats the submissions above with respect to Part 2, for the purpose of Part 3.
53. ln view of evidence, and the relevant decision-making principles in Part 3 of the Principles, the Tribunal can be satisfied that the Applicants' asset attribution percentage in relation to the Trust should remain as 100%. (Original Emphasis)
The Applicant contends (A1):
In regard to our appeal against the AAT review findings of the Social Services Departments decision to refuse our application for an aged pension, we submit further information.
1. The Department has relied solely on the premise that I/we CONTROL the private company, L&M Dunstan Nominees Pty Ltd and are the Source of the company’s funds.
2.Section 1207 of the Act establishes a system for the attribution to individuals of the assets of private companies and specifies certain criteria that controls whether those assets can be attributed to any individual.
3.Those criteria rely on clear proof that the individual has control over the private company, Sections 1207Q and 1207V. of the social Securities Act
4.The Control Test legislation sets out the following criteria.
a.The sum of the direct voting interests in the company that the person AND the person’s associates have is 50% or more. I HOLD NO VOTING RIGHTS -FAIL
b.The person alone or with associates is beneficially entitled to 15% or more of the Capital or Dividends of the company. I HAVE NO BENEFICIAL RIGHTS – FAIL
NOTE. Where an income support recipient fails to pass any one of these criteria the Company will not be a controlled private company with respect to that individual.
In regard to the Source Test it is clear in all evidence that the share transfer for L&M Dunstan Nominees Pty Ltd was made at the true value of the shares at that time. The company had zero assets and the value of the Company’s shares was $1.00 per share, the amount paid by the recipients of the shares was $1.00 per share.
AAT member M Martellotta in her findings of the 19th April 2018 details 6 reasons to support her decision to uphold the department’s position. I will address each one below.
a.The company L&M Dunstan Nominees Pty Ltd was sold to our children in 2001 to protect it from any possible action by the Commonwealth Bank.
b.The fact that as an employee of the company, I acted for and in the best interest of the company as instructed by the shareholders does in no way make me the source of any funds. The company arranged a loan to buy the original property in 2002 and the shareholders were the guarantors of that loan.
c. As an employee of the company I was obliged to act in the company’s best interests, all major and financial decisions were voted on by the shareholders.
d. As an employee, part of my role was to manage the day to day functions of the company, that included collating and paying all reoccurring accounts, all major activities such as property purchase and sale were under the instruction of the shareholders. The limitation on my being a director was released in 2008, I only resumed the directorship some years later at the request of my daughter who did not want the extra responsibility at the time.
e. The only benefit my wife and myself received was the acquisition of the Banjup property, as a beneficiary of the CI Hardware Trust we accrued some $1,300,000.00 in distributions over 13 years, these distributions were exchanged for the property instead of the trust having to pay us out. The use of part of the Spearwood warehouse was insignificant as we only used some 5% of the available space; the remainder was taken up for storage of company assets.
f. The assertion that none of our children take any interest in the affairs of the company is without foundation, our Son Michael has been actively involved since 2003, our Daughters Donna and Tonya have both run their own businesses for the past 20 plus years and are in constant contact and involvement in the decision making in regard to the companies activities, the company has provided substantial financial support to all of their individual businesses.
We rely on fact and the Law in regard to this matter, in our view the Law is clear in that we fail the Control Test and the Source Test; therefor [sic] the Departments position is flawed. (Original Emphasis)
HEARING
The application for review was heard in Perth on 8 January 2019. The Applicant (Mr Greyson) appeared in person and took the oath. His wife Yvonne Greyson did not appear. The Respondent was represented by Mr Burgess of Sparke Helmore.
The Tribunal would like to thank both the Applicant and the Respondent for their assistance during the hearing.
The Applicant opened by relying on his statement and stating his and his wife’s application for aged pension had been rejected because they were found to be attributable stakeholders. He stated “We are not controllers of L&M Dunstan”. He said their only role in L&M Dunstan was involvement in day to day activities and they did not receive a salary or a wage.
He said they were refused the aged pension (Transcript p3):
…they’ve had attributed to me, and my wife, all of the assets of L&M Dunstan Nominees Pty Ltd. L&M Dunstan Nominees Pty Ltd does have assets, but my wife and I do not have - as asserted, we don’t have control of the company, and we are not the controlling people of the company. Our children are the shareholders.
The Applicant went on to say (Transcript p3-4):
My position is that there are three requirements to make me the controlling person of the company. (1) That I must have shares in the company, along with my children who are beneficiaries or deemed beneficiaries - beneficiary, is that the right word? Associates, I’m sorry. Deemed associates. We don’t hold any shares. I hold - I held a position in the company until 2005, or my wife and I both did. We then withdrew from those. In 2014 or thereabouts I returned as a director and then secretary because my eldest daughter wanted to withdraw from the activities, she had some other issues which are irrelevant here I think. Hence I’m the director, secretary, my youngest daughter is the fellow director. I look after the day-to-day activities. In other words, I’m an employee of the company and inasmuch as I have been paid in the past for my services, and I get - I could be paid periodically, but I don’t demand any money.
The Applicant’s position is (Transcript p4):
So my position is that the rules of - that to fulfil the position that the Department, they are (1) that I’m a shareholder; (2) that I’m a beneficiary of the funds, and I’m not a beneficiary of any funds, the - without the explicit agreement of the shareholders. So I have no control in the funds, I can - as I say, I control small payments here and there, but other than that, no. I’ve signed sale agreements for properties as a director, and my daughters both have been involved in those as well because it requires more than one director to do that.
The Respondent opened by relying on its Statement of Facts, Issues and Contentions (R2). The Respondent addressed the legislation, that the Applicants’ children in their role as Directors were Associates of the Applicants, the pattern of influence in the decision making by the Applicants in L&M Dunstan, and the past and future benefits the Applicants have gained and are due to gain from L&M Dunstan nominees all pointing to the fact that there is no reason to find they are not attributable stakeholders.
The Respondent stated (Transcript p5):
…in this case the Dunstan Nominees holds, as at February 2017, the Department assessed Dunstan Nominees as holding 2.8 - just over 2.8 million in assets, and that is, we have submitted at paragraph 33 of our SoFIC.
The test for whether the assets of the company should be deemed to be assets of the applicant have some history. They were brought in to stop people placing assets into trusts or companies in order to still qualify for pensions, Aged Pension, Disability Pension, et cetera, despite having funds available which would be - but for them putting that through a trust or company, would be able to support them without relying on the public purse.
The test, in that sense, is used to lift the corporate veil and deem someone to own assets or to receive income where - in certain circumstances where the company or the trust holds those assets or receives that income. So the tests are starting - we set them out at paragraph 34 of the SoFIC. That’s firstly it must be a designated private company, and we understand that that’s not in contention that it is a designated private company. Where the applicant disputes is that it is a controlled private company, and that’s what we’ve set out at paragraph 36 onwards.
So a company is a controlled company in relation to an individual if the company is a designated private company and the individual passes the control test, or the individual passes the source test. The control test is set out in section 1207Q, and that has a - we’ve set out at paragraph 37, and we say - the Secretary submits that the applicant passes - would satisfy any of those definitions to pass the control test. And that is because if you look at the aggregate of, for example (a), the direct voting interest in the company that the individual holds, and the direct voting interest in the company held by associates of that individual is 50 per cent or more.
Now, in this case, as we understand it, Dunstan Nominees is solely made up of associates of the applicant. ‘Associates’ is defined in section 1207(c) as including a relative of the applicant. So in this case the applicant’s children control 100 per cent of the voting interests in the company. And by that sense the direct voting interests held by the applicant and the associates is clearly more than 50 per cent. The controlling interests is again, because of that, more than 15 per cent, so (b) would be satisfied, and in that sense (c) the company is sufficiently influenced by an individual or an associate.
Now, in our submission the applicant himself sufficiently influences what the company does to pass that, but even if he didn’t, given the company is made up only of associates, would still be - there would still be the sufficient influence by the applicant and associates to pass (c), and then again (d) the individual, either alone or together with associates, is in a position to exercise control over the company.
The Applicant’s evidence followed the same path made to the AAT1. He did however clarify statements contained in the Respondent’s SOFIC at page 8 accordingly:
·L&M Dunstan Nominees was purchased by Greyson Nominees. That company (Dunstan Nominees) had a caravan park.
·The caravan park was sold sometime later and Dunstan Nominees had no assets. The company stood dormant because “Greyson Nominees had been established back in 1975, and it took over the activities – or our activities, the family activities.” (Transcript p10)
·Dunstan Nominees did not purchase any properties until 2003.
·Greyson Nominees purchased $5 million worth of property, with funds from the Commonwealth Bank in early 2000.
·Greyson Nominees in 2002 became the subject of receivers as the Bank commenced foreclosing its loan.
·Dunstan Nominees was used as the vehicle to restart the Applicants’ commercial lives. They transferred their shares to their children. The Applicant stated: “we were intending to restart our life, we would utilise L&M Dunstan as a company, as a masthead, so to speak.” (Transcript p11)
·The property at [xx xx] Highway, (Highway Property) was purchased by Dunstan Nominees at an auction, on the advice of the Applicant.
·The Woodlands property, though originally owned by his wife’s father, had been sold to his daughter, and was purchased from her by Dunstan Nominees.
·The road house was given to the Applicants. It became the property of Cebay Holdings.
·Christmas Island Hardware was identified as a business to purchase by his son in 2003. The Applicant stated Dunstan Nominees purchased the Hardware business, through CI Hardware Trust and Dunstan Nominees was the appointer of the Trust.
·The Applicants went to Christmas Island in 2005-6 and ran the hardware business with their son. The Applicants were beneficiaries of CI Hardware Trust. The Applicant stated:
…and it accumulated substantial beneficial - beneficiary entitlements, to the amount of - it was more than 1.2 million over all those years, along with my son and my youngest daughter were also beneficiaries of the trust, they also have - they still are beneficiaries. The property in Banjup was bought by L&M Dunstan. (Transcript p13)
·The Applicant further clarified for the Tribunal who owned the property in Banjup:
Now, is that the one you’re staying in? Yes. It was bought by L&M Dunstan as trustees of the CI Hardware Trust. The CI Hardware Trust owned it, but as far as land gate goes, they won’t have that, it has got to be in a company name, so L&M Dunstan was the trustee, they did that.
…..
So that was time for that to roll over, and I spoke with the children and said, “I will exchange my beneficiary funds in the trust for the property in Banjup.” They thought that was a good idea, and we did that, and I do have a copy of the stamp duty statement which reflects that we only paid $20 stamp duty because the - because of the transfer of beneficiary funds via property attracts a very low stamp duty. (Transcript p13-14)
·The Applicant stated the amount of approximately $1.2 million in beneficiary funds was transferred from Dunstan Nominees to purchase the Banjup property.
·He also stated that CI Hardware Trust & Dunstan Nominees sold CI Hardware Trust to the brother of the shareholder, Michael. He pays rent and repayments to Dunstan Nominees.
·He said the assertion by the Department suggesting that Dunstan Nominees was established as a main asset holding was incorrect. He stated:
I didn’t really do that. I did that as a venture vehicle, and I didn’t want Commonwealth Bank to seize the company, which would have made it a bit inconvenient for us. So, yes, after that it talks about the fact that I ceased being a director in 2005, which is when the legal proceedings ceased with the Commonwealth Bank, and they had their way, and my wife and I were declared bankrupt. My son and daughter were the directors and secretary then from that time on. Well, one of them already was; the other one took over. (Transcript p14)
·The Tribunal asked the Applicant how often he worked at CI Hardware and he stated:
Well, I work with my son every day, so an opportunity came along, and he needed a house on Christmas Island to live in when he moved back – L&M Dunstan purchased a property on Christmas Island for him to live in, and it’s subsequently been sold. (Transcript p15)
·The applicant said it was not correct to suggest as the Department has that he and his wife might receive future distributions from the company. He stated:
Well, that isn’t true. It’s not foreseeable. We don’t receive any distributions from the company, and we’re unlikely to. The whole idea of this was for our children to have a better life than we had, in as much as they didn’t have to work as much. It’s not working that well because they work just as hard as we did, but that’s an aside. But when their time comes, one would hope that life will be easier for them. It’s then contended that we made considerable contributions to the acquisitions of the company. Well, we never contributed anything. L&M Dunstan made their own arrangements in as much as funding and whatever for all the properties they purchased, and… (Transcript p15)
·Money owed to the Applicants by Dunstan Nominees was used to purchase the Banjup property.
·The Applicant stated the company was primarily a family business, he provided advice from time to time and mostly his children took it. The Applicant stated the children were adults and made their own decisions.
·The Applicant stated he could not meet the control or source test because he and his wife do not get any benefit from Dunstan Nominees. The Applicant stated:
My position is that we don’t control the shareholders or the company, and we’re not the source of their funds, and we do not control the individuals that run the company. We might advise and talk as parents normally would, but control is just – can’t happen. The Act sets out the criteria to allocate me those things, and I believe that we fail them – fail at least two of them, and that then rules us out of contention. (Transcript p16)
Under cross-examination the Applicant submitted the following:
·He sold two shares in 2001 from Dunstan Nominees to his daughters for $1 each.
·He did that because he was facing bankruptcy proceedings by the Commonwealth Bank.
·His daughters purchased the Woodlands property through Dunstan Nominees, in late 2003.
·At that time he and his wife were directors and sole shareholders of Cebay Holdings.
·Cebay Holdings loaned the money to Dunstan Nominees to purchase the Woodlands Property. The Applicant stated:
You told the tribunal that you weren’t certain if the loan had ever been repaid? No, and I’m not. I repeat – I say that now. So your wife and you loaned money to your daughters to purchase the property, your daughters being Dunstan Nominees, if I can simplify it that way? Yes. And the lift the company – the veil of it. Dunstan Nominees, therefore, owed, possibly still owes, Cebay Holdings the purchase price of that property? Possibly. (Transcript p19)
·The Applicant confirmed Cebay Holdings acquired the Roadhouse at no cost. The Roadhouse was run by the family. It was sold for $150,000. Those funds were used by Cebay Holdings to purchase CI Hardware.
·The Applicant agreed with the Respondent’s solicitor accordingly:
Now, Dunstan Nominees was the appointor of the CI Hardware Trust, so essentially Dunstan Nominees purchased the property, the hardware? Well, I’m not actually au fait with the real legal thing, but it seems to – I know that the appointor has certain controls over the trust, but I don’t know that the appointor actually owns the trust.
Well, the appointor can appoint the trustee and - - -? Fire the – appoint - - -
- - - fire the trustee? - - - the new trustee, exactly, but it doesn’t give them ownership.
Yes? It just has some controls.
Well, the CI Hardware Trust was – who was the trustee of that trust? L&M Dunstan. Yes, L&M Dunstan were the trustee of the CI Hardware Trust.
And the appointor. So L&M Dunstan - - -? And the appointor, yes.
- - - had control over the C and I - - -? The CI.
Sorry, the CI Hardware Trust? Yes. (Transcript p20-21)
·The Applicant confirmed Cebay Holdings (he and his wife) contributed money to Dunstan Nominees to purchase the Woodlands property and gifted money as well to Dunstan Nominees for the purchase of CI Hardware Trust, which Dunstan Nominees controlled.
·The Applicant confirmed he worked at the Hardware Store for approximately 10 years and was not paid for that work. He stated: “We accrued beneficiary funds. We had small – we had enough funds to live, because we never had to buy anything.” (Transcript p22)
·He claimed these beneficiary funds amounted to approximately $160,000 annually for he and his wife. That over 10 years accrued $1.3 million which was exchanged for the purchase of the Banjup property from CI Hardware Trust for about $1.3 million.
·The Applicant responded to the Respondent’s questions accordingly:
So if I can simplify it in my mind, you were given that money, you gave it back to the trust and said “We’ll take the property”? In longhand, that’s – yes, that’s it. Yes. Then you moved from Christmas Island to Banjup? To Banjup. (Transcript p25)
·The Applicant confirmed that motor vehicles stored at the Spearwood property were under the guardianship of Dunstan Nominees. The Applicant agreed with the following assessment of the Respondent’s solicitor:
It’s fair to say that L&M Dunstan owns the building. L&M Dunstan, essentially if anyone in the family wants to store something there, they can? Pretty well, yes. Including yourself? Yes, but I don’t need to now, I’ve got plenty of room. So that 90-odd square metres is utilised by the family, not necessarily only the shareholders of L&M Dunstan. (Transcript p32)
The Applicant did not make any closing remarks.
The Respondent submitted the following:
Firstly, we would submit that the applicant is – sorry, that the company is a controlled private company. It’s not necessary that the applicant passes the source test, although it’s clear, in my submission, that some of the sources of the assets of the company are the applicant and his wife, or through their other company, Cebay Holdings – sorry Cebay. It’s either a designated private – sorry, a controlled private company if the control test is passed or the source test is passed.
In this case it’s clear, in our submission, we’ve outlined it from 36 through to 40, that the applicant passes the control test, because associates hold more than 50 per cent of the direct – the aggregate of the applicant’s voting interests and his associates, being his children, hold more than 50 per cent. That’s regardless of whether the applicant holds any, himself. The tribunal will then need to move onto the second requirement, which is that the applicant is deemed to be an attributable stakeholder unless the tribunal determines otherwise. That’s where the tribunal needs to take into account the principles in part 2, which we’ve addressed in detail.
The applicant’s evidence, which we say is relevant to that, is essentially that him and his wife, being Cebay Holdings, have loaned money to Dunstan Nominees, have acted as directors of Dunstan Nominees, have not required those loans to be paid back to them, so they are essentially holding money in Dunstan Nominees that is owed to them. That is both in relation to the hardware – or the transfer of the property in relation to the hardware, but also in relation to the Woodlands property.
The hardware was purchased with funds from the applicant and his wife, being Cebay Holdings. All of those are relevant considerations in relation to the determining whether or not the applicant – sorry, determining – if the tribunal were to determine that the applicant is not an attributable stakeholder, particularly contribution to the company. Past benefits. The applicant, in our submission, has clearly obtained past benefits from Dunstan Nominees. There is no reason for him to continue his association with Dunstan Nominees if it wasn’t providing some benefit, whether that be a direct distribution or not.
There is likely, in our submission, a future benefit from that company based on the way that the company has been used in the past essentially as whenever a member of the family requires assistance, that company is used or the assets of that company are used to provide that assistance. That’s quite clear from the history. In our submission, therefore, there is no reason that the applicant should not be deemed to be an attributable stakeholder of the company.
Then considering whether or not what the asset attribution percentage would be, it’s a starting point that the asset attribution is 100 per cent, and if the tribunal is left in any doubt, any state of doubt as to what that asset attribution should be, then it should be 100 per cent, and that’s a decision in McDonald. If the tribunal is to determine a lower percentage, which it would be open for the tribunal to do, the tribunal would have to consider the considerations in part 3, and address each of those considerations as mandatory relevant considerations.
For the same reasons as in part 2, the Secretary submits that having regard to weighing up each of those considerations, there is – the overall weight does not suggest that the tribunal should make a different decision other than the default deemed decision that 100 per cent of the assets are attributable to the company. If it’s the case that the tribunal disagrees with that, and it attributes a different percentage, then the correct decision in that case would be to make a determination about the percentage and remit the matter for calculation of what that means. Obviously it may be that even a 50 per cent attribution would result in the applicants not being entitled to aged pension, because of the significant assets that the company holds. (Transcript p32-34)
CONSIDERATION
The ASIC records show that Dunstan Nominees was purchased in 1978 by the Applicants and that they were the only Directors from 1979 to 2005 (T41, 444-5).
The ASIC records show that on 1 October 2014 Mr Greyson became a Director with his daughter Tonya Greyson of Dunstan Nominees (T44, 456).
The Tribunal notes Minutes of Meeting of Directors of L&M Dunstan Nominees Pty Ltd dated 1 August 2001 indicate that the Applicants transferred each of their one ordinary share of $1 to, Donna Leanne Greyson and Tonya Louise Greyson (T7, 138).
The Tribunal notes there were an additional 1000 shares issued on 31 January 2003 of which 949 were allocated to Donna Greyson and 51 to Michael Greyson (T41, 446-8).
The Private Company Declaration of the Applicants states the private company is known as L&M Dunstan Nominees Pty Ltd and that the company holds 5 properties (T29, 330-345).
The Respondent’s SOFIC shows that the properties are described as (R2):
a.[xx xx] Avenue, Woodlands, WA 6018 (Woodlands property) - Residential rental property purchased on 1 May 2003 with an estimated current market value of $350,000. The tenant is Tonya Greyson paying $245.00/week rent (T29, p 340- 342);
b.[xx xx] Christmas Island - Leased, purchased on 1 January 2006, with an estimated current market value of $490,000. The tenant is Cl Phosphates paying $550/week (T23, p 263-265);
c.[xx xx], Christmas Island - Leased, purchased on 1 April 2008 with an estimated current market value of $490,000. The tenant is Cl Phosphates paying $500/week rent (T21, p 255-257);
d.[xx xx] Road, Christmas Island - Leased, purchased on 1 April 2008 with an estimate current market value of $500,000. The tenant is the business operator of the Cl Hardware Trust (Michael Greyson) paying $4000/month rent (T22, p 259- 261); and
e.[xx xx] Road Spearwood WA 6163 - Storage facility. Purchased on 1 February 2010 with an estimated current market value of $200,000 (T24, pp 267-270).
Mr Greyson told the AAT1 the following (T3, 15):
l)Another property acquired by Dunstan Nominees was a storage shed in Spearwood. Mr Greyson stated that this was purchased so that he and Mrs Greyson and also their son could store personal property when they moved to Christmas Island.
m)Mr Greyson agreed that he and his wife were the directors of Dunstan Nominees until July 2005 and that in October 2014 he again became a director. He said he had resigned from the directorship due to being declared bankrupt but once that period was completed he resumed that role. He agrees that he is also secretary of the company since March 2017.
n)Mr Greyson stated that he manages the day to day affairs of the company free of charge. Whilst his tax return shows that he received payment of $5,000 for those services in 2016 that was done in order to accommodate another financial situation and he never actually received any remuneration for his services. He is currently a director with one of his daughters. He is the sole signatory on the company’s bank account and has full authority to utilise the accounts.
In the Private Company Declaration the name Modern Computer Systems appears and has two Directors – Donald Greyson and Mark Garland (T26, 276-77). The Tribunal notes Mr Greyson told the AAT1 (T3, 13-14):
d)The assets of Greyson Nominees were subsequently acquired by CBA. Mr Greyson was involved in legal proceedings involving the bank. He and his wife eventually were declared bankrupt which prevented them from holding a directorship for a number of years.
e)The assets of Greyson Nominees were sold off. However, one of the assets owned by that company ([xx xx] Highway) was purchased at auction by Dunstan Nominees in 2002. This property had housed a business, Modern Computers. Dunstan Nominees holds shares in the company which owns that business. Mr Greyson stated that he used to work out of an office situated at Modern Computers and that he still has an association with that business (which has since relocated to Perth). He states that he provides bookkeeping and other services for free – he does this for no payment because it was something that he likes to do.
f)Mr Greyson stated that he organised the finance which allowed Dunstan Nominees to purchase the [xx xx] Highway property at auction. He personally negotiated the loan with the National Australia Bank (NAB) and agrees that he acted as Dunstan Nominees’ representative. He stated that the decision to purchase at auction was a family decision and that his daughters relied upon his advice and knowledge.
The Tribunal notes Mr Greyson told the AAT1 (T3, 14):
h)In 2009 Dunstan Nominees sold the [xx xx] Highway property for $1.7 million. Mr Greyson said that he was contacted by a third party who made an offer for the property. The family (he, his wife and his three children) made the decision to sell as it was a good offer.
i)The funds from that sale have since been used by Dunstan Nominees to purchase its current real estate holdings which are mostly situated on Christmas Island.
The Private Company Declaration of CEBAY Holding PTY LTD shows Donald Greyson, Yvonne Greyson, Michael Greyson and Tonya Greyson as Directors (T28, 315-6).
Mr Greyson told the AAT1 (T3, 14):
g)Another property acquired by Dunstan Nominees in 2003 (the Woodlands property) was a property that his wife and her sisters had inherited. Mr Greyson stated that another company established by himself and his wife (Cebay Holdings Pty Ltd, or Cebay Holdings), of which he and his wife are sole shareholders and directors, purchased that property from his wife’s sisters. They then sold the property to one of their daughters. However, when their daughter ran into financial problems the family decided that Dunstan Nominees would purchase the property from her and allow her to live there rent free. Dunstan Nominees obtained a loan from Cebay Holdings to purchase the property. Mr Greyson was not certain if that loan had been repaid.
He also told the AAT1 (T3, 14):
j)Cebay Holdings acquired a roadhouse business in Beaufort River. The business was acquired for no charge and later sold for $150,000 in 2006. Mr and Mrs Greyson moved to Christmas Island. This provided the funds for the purchase of a hardware store on Christmas Island. That business was operated by Mr Greyson’s son and also by Mr Greyson for a period of time. That business is operated through a family trust (CI Hardware Trust).
The Tribunal notes the property became an asset of L&M Dunstan Pty Ltd on the 1 April 2008 (T22, 259-61). The address of the property is noted as [xx xx] Road, Christmas Island (CI).
Mr Greyson told the AAT1 (T3, 15):
20.The tribunal noted a transfer of land document dated 28 October 2016 which Mr Greyson signed on behalf of Dunstan Nominees as director and secretary. In that transaction Dunstan Nominees transferred a property to Mr Greyson and his wife (they both signed as the transferees). The consideration for the transfer was $1,198,111.94. Mr Greyson stated that this property is where he and his wife now live in Banjup. He had decided to leave Christmas Island and retire. He located the property in Banjup. He and his wife had a beneficial interest in the CI Hardware Trust (which is controlled by Dunstan Nominees) and this interest was transferred to his son and used to purchase the Banjup property.
Dunstan Nominees transferred Lot [xx] a property at Banjup personally to the Applicants on 28 October 2016. The Tribunal notes Donald Greyson signed the transfer as Director and Secretary and that consideration was in the amount of $1,198,111.94 (T9, 140).
It was paid for through the cashing in by the Applicants of their beneficiary entitlements in CI Hardware Trust.
The Tribunal notes from the material available that the Secretary assessed at the time of applying for an aged pension the Applicants having combined assets totalling $3,078,944, of which Dunstan Nominees comprised $2,802,267, classified as attributable assets (T67, 705).
The AAT1 noted (T3, 13):
16.At hearing Mr Greyson confirmed that the only issue in dispute was the decision to attribute him and his wife with the assets of Dunstan Nominees. The value of those assets and their ownership of other assets involving other family trusts and another private company were not in dispute. He agrees that Dunstan Nominees meets the definition of a designated private company and the tribunal so finds.
On the basis of the material before it the Tribunal finds Dunstan Nominees a designated private company at the time the Applicants applied for age pension. It meets at least two conditions set out in s 1207N(1)(a) of the Act.
Having determined that Dunstan Nominees is a designated private company the Tribunal will now consider s 1207Q of the Act to determine if the Applicants pass the control test or source test.
The evidence before the Tribunal demonstrates that the Applicants’ involvement with the company satisfy section 1207Q(2)(a) of the Act. Voting interests are 100% in the control of the children of the Applicants, who are categorised as associates of the Applicants. Further, the Applicants satisfy s 1207Q(2)(b) of the control test as associates of the Applicants hold 100% of the capital and dividends of the company.
The Tribunal is satisfied that the company Dunstan Nominees is sufficiently influenced by Donald Greyson. The role played by Donald Greyson in Dunstan Nominees as outlined in the evidence meets the criteria in section 1207Q(2)(c) of the Act.
The evidence before the Tribunal demonstrates:
·He enjoys participating in the activities of the company;
·He manages day to day activities of the company with the concurrence of shareholders;
·His children are too busy to run the company;
·His children rely on him for advice and experience; and
·He lives on the property of the address of the Dunstan nominees.
·He told the AAT1 (T3, 15):
Mr Greyson stated that he manages the day to day affairs of the company free of charge. Whilst his tax return shows that he received payment of $5,000 for those services in 2016 that was done in order to accommodate another financial situation and he never actually received any remuneration for his services. He is currently a director with one of his daughters. He is the sole signatory on the company’s bank account and has full authority to utilise the accounts.
The Tribunal finds on the evidence before it the Applicants pass the control test. Mr Greyson is afterall a co-director and secretary of Dunstan Nominees.
The Tribunal will now consider whether Donald Greyson meets the criteria of attributable stakeholder pursuant to Clause 6 of the Principles:
6Application
(1)This Part applies if, but for a determination by the Secretary, the individual would be an attributable stakeholder of the company or trust.
(2)The Secretary must consider the relationship between the individual and the company or trust having regard to:
(a) the reason why, but for a determination, the individual would be an attributable stakeholder; and
(b) the circumstances mentioned in this Part.
(3) In particular, the Secretary must consider whether the effect of one or more of the circumstances mentioned in this Part, in relation to the individual and the company or trust, provides a sufficient basis on which to determine that the individual is not an attributable stakeholder of the company or trust.
7Circumstances affecting relationship with company or trust
(1)The Secretary must consider whether there are relevant circumstances that make it inappropriate for the individual to be an attributable stakeholder of the company or trust.
(2)For subsection (1), relevant circumstances include the extent to which the relationship between the individual and the company or trust is affected by any of the following circumstances:
(a) circumstances arising from the legal structure of the company or trust;
(b) circumstances arising from the administrative arrangements of the company or trust;
(c) whether, having regard to the relationship between the individual and the company or trust, the individual can reasonably be expected to exercise effective control in relation to the company or trust
8Contribution to company or trust
If the individual has made a contribution to the company or trust, the Secretary must consider the circumstances in which the contribution was made and, in particular:
(a)the value of the contribution; and
(b)the proportion that the value of the contribution has to the total assets of the company or trust at the time of the contribution; and
(c)the effect of the contribution on the financial position of the company or trust; and
(d)if the individual received consideration for the contribution, the amount of consideration.
(Original Emphasis)
The Tribunal notes from evidence given to the AAT1 and this Tribunal that the Applicants established Dunstan Nominees to provide for a secure financial future for themselves and their children.
Dunstan Nominees provided the Applicants with the mechanism to purchase real estate and businesses and to grow their wealth portfolio.
The Tribunal finds the purchase of such assets has provided the Applicants through share-holdings, family trusts and/or other private companies the mechanism to secure their financial future. The caravan park in Geraldton, the Highway Property, the Woodlands Property, the sale of the Roadhouse in Beaufort River, the purchase of a hardware store on CI and the current home in Banjup are all intertwined financially with Dunstan Nominees.
The Tribunal finds pursuant to section 1207X(1) on the basis of the evidence before it that it is satisfied for all intents and purposes Donald Greyson and Yvonne Greyson are attributable stakeholders of Dunstan Nominees. The Tribunal having considered section 1207X(1)(a), in so far as whether the Applicants are not attributable stakeholders is not pursuaded on the evidence before it that such a determination can be concluded.
The Tribunal is mindful in coming to this finding of the case Geidens and SDFC [2003] AATA 773 at [29]-[31] as discussed at (R2). This case also discusses what effective or reasonable control might mean at [34]-[35].
The Tribunal acknowledges that the Applicants have not been shareholders of Dunstan nominees since 2001.
It is however mindful of Clause 10 of the Principles:
10Future benefit from distributions by company or trust
(1) The Secretary must consider whether it is reasonably foreseeable that the individual may receive a benefit from a future distribution by the company or trust.
(2)If subsection (1) applies, the Secretary must also consider the likely value of the benefit.
(3)For this section, the Secretary must have regard to:
(a) the constituent documents of the company; or
(b) documents, if any, establishing the terms of the trust.
(4)For this section, a distribution includes distributions:
(a) in the case of a distribution by a company — of the capital or income, or both, of the company; and
(b) in the case of a distribution by a trust — of the corpus or income, or both, of the trust.
(Original Emphasis)
The evidence before the Tribunal indicates the Applicants have secured significant financial security for themselves and their family. These have been previously outlined.
The Tribunal finds given the role of Mr Greyson in Dunstan Nominees from the evidence before it that there is no evidence to suggest that the Applicants would not be in receipt of past and future benefits from the Company at some point in time.
The Tribunal notes Part 3 of the Principles of asset attribution percentage and concludes there is no evidence before it to persuade it that the Applicant’s asset attribution is anything other than 100%.
The Tribunal finds as did the AAT1, the following in respect to the activities of Donald Greyson:
·He is for all intents and purposes in control of Dunstan Nominees;
·He is a Director and Secretary who operationally manages the company on a day to day basis;
·The significant assets of Dunstan Nominees have their genesis in property originally held in Mr and Mrs Greyson’s first company known as Greyson Nominees;
·The Applicants profited from the sale and purchase of property through Dunstan Nominees and in the process secured their and their family’s financial future.
Whilst the Tribunal notes the submission of the Applicant it is not persuaded that he is only acting as a loyal employee of the company. The financial basis of Dunstan Nominees and the wealth creation generated by that company secured the future of the Applicants and their children.
In addition the ongoing role of Donald Greyson in the various companies and trusts resulting from Dunstan Nominees has persuaded the Tribunal that Donald Greyson’s role was far more than that of a loyal employee. The Tribunal finds the legal structures were carefully designed for a specific purpose and that Donald Greyson was calculating in the way he went about securing his and his family’s financial security.
On the basis of the evidence before it and noting the legislative framework the Tribunal finds the Applicants’ combined assets were greater than the prescribed asset threshold.
DECISION
The decision under review is affirmed.
I certify that the preceding 73 (seventy three) paragraphs are a true copy of the reasons for the decision herein of Member C Edwardes
.......[Sgd]............................................................
Associate
Dated: 4 February 2019
Date(s) of hearing: 8 January 2019 Applicant: In Person Counsel for the Respondent: Mr A Burgess
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